Morning Commentary: CenterPoint Energy convertible notes offering on tap

By Abigail W. Adams

Portland, Me., Aug. 1 – The convertibles primary market broke its silence on Tuesday with a long-awaited new deal on deck.

CenterPoint Energy Inc. plans to price $900 million of three-year convertible notes after the market close on Tuesday with price talk for a coupon of 3.875% to 4.375% and an initial conversion premium of 25% to 30%.

The deal was heard to be in the market with assumptions of a 100 basis point credit spread and an 18% vol.

Using those assumptions, the deal looked about 1 point cheap at the midpoint of talk, sources said.

The first new deal to hit the market in more than one month was not met with much enthusiasm with the offering more low vol., short-duration paper from an investment-grade utility.

“It doesn’t look brilliant,” a source said. “People are getting saturated with deals like this.”

However, there is little doubt the deal will get done.

Meanwhile, there was little activity in the secondary space early Tuesday with equity indexes mixed at the open.

The Dow Jones industrial average was up 13 points, or 0.03%, the S&P 500 index was down 0.30%, the Nasdaq Composite index was down 0.41% and the Russell 2000 index was down 1.21% shortly before 11 a.m. ET.

There was $63 million in reported volume on the tape with a large number of names in play.

However, no name saw more than $5 million in reported volume.

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